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Recent Midwest Generation Decision from Seventh Circuit Liberally Construes Statute of Limitations on Clean Air Act’s PSD Permit Requirement

08.15.2013

By Larry Kane, Attorney, Bingham Greenebaum Doll LLP

In early July, 2013, the Seventh Circuit Court of Appeals issued a pithy decision of rather profound import for EPA’s air enforcement program addressing sources that have implemented major modifications of major sources without required PSD permits.  United States v. Midwest Generation, LLC, 2013 U.S. App. LEXIS 13709 (July 8, 2013), involved a judicial enforcement action brought by the federal government and the State of Illinois against a power company that made modifications without a Prevention of Significant Deterioration (PSD) permit to five of the defendant’s coal-fired power plants ten years or more before the enforcement action was initiated.  It was assumed for purposes of the litigation that the modifications had been major modifications subject to the PSD requirements of the Clean Air Act.  The court held that the modifications, having commenced more than five years before the federal government filed the judicial enforcement action, were not unlawful as a result of the passing of the applicable statute of limitations.  Of particular import is the court’s conclusion that the defendant’s failure to have obtained preconstruction permits for the modifications did not result in continuing violations of the Clean Air Act for operating the modified plants without Best Available Control Technology (BACT).  With the expiration of the statute of limitations, the court observed that, “[the defendant] was entitled to proceed as if it possessed all required construction permits.” Slip Op., at 7.

There are two salient rulings in the succinct decision that lead to the ultimate holding of the case.  First, the court found that the five-year period of the applicable statute of limitations (28 U.S.C. §2462) is not extended (or tolled) by any time period involved in discovering the occurrence of the plant modifications that allegedly violated the PSD permitting requirements of 42 U.S.C. §7475(a).  This holding was based on a recent Supreme Court decision, Gabelli v. SEC, 133 S.Ct. 1216 (2013), which held that “the time for the United States to sue under §2462 begins with the violation, not with a public agency’s discovery of the violation.”  Id. at 4.

Second, the governments’ attempt to circumvent the problem posed by Gabelli – an argument that the failure to obtain a PSD construction permit under 42 U.S.C. §7475(a) is a continuing violation rather than a one-time violation – was rebuffed by the court.  The court observed in regard to this issue that, “[t]he violation is complete when construction commences without a permit in hand.  Nothing in the text of §7475 even hints at the possibility that a fresh violation occurs every day until the end of the universe if an owner that lacks a construction permit operates a completed facility.”  Slip. Opinion, p. 5.  It was noted by the court that two other courts of appeals also have rejected the contention that operation of a plant that had failed to obtain a construction permit constitutes a new violation of §7475, citing Sierra Club v. Otter Tail Power Co., 615 F.3d 1008 (8th Cir. 2010), and National Parks and Conservation Association Inc. v. Tennessee Valley Authority, 502 F.3d 1316 (11th Cir. 2007).  The court capped its analysis of this issue with the following statement (Slip Op., p. 7):

We have already concluded that §7475 deals with getting permission for construction, not with a plant’s operations; it follows that Commonwealth Edison’s [assumed] violations of §7475 during the 1990s do not make its current operations a violation of federal law . . . .

Apparently believing the foregoing aspect of its holding needed reemphasis, the Court reiterated its conclusion on the second issue on page seven of the Opinion as follows:

Plaintiffs’ contention that a continuing injury from failure to get a preconstruction permit (really, from failure to use BACT) makes this suit timely is unavailing.  What these plants emit today is subject to ongoing regulation under rules other than §7475.  Today’s emissions cannot be called unlawful just because of acts that occurred more than five years before the suit began.  Once the statute of limitations expired, Commonwealth Edison was entitled to proceed as if it possessed all required construction permits.  That’s the point of decisions such as United Air Lines, Inc. v. McMann, 434 U.S. 192 (1977); Ledbetter v. Goodyear Tire and Rubber Co., 550 U.S. 618 (2007).

Clearly, the Midwest Generation decision has significant ramifications for EPA’s enforcement strategy, as applied within the Seventh Circuit, for addressing alleged failures to obtain preconstruction permits under the federal PSD program. It may have broader implications for EPA in practical terms now that three of the nation’s courts of appeals have reached similar conclusions on the operative effect of the federal statute of limitations.  Enforcement officials (and private persons contemplating citizen suits) must be diligent in identifying alleged violations and initiating action within the 5-year period commencing with the start of construction of an alleged major modification. 

While it may be a more subtle point, it may also be inferred from the decision that an alternative route sometimes used by permitting agencies to address previous instances of inadequate permitting – i.e., requiring corrective permitting actions during Title V permit renewal proceedings or during PSD permitting for a subsequent project – is no longer available either.  It may be understood from a generalized form of the court’s next to last statement quoted above from the decision:

Once the statute of limitations expired, [the modified source] was entitled to proceed as if it possessed all required construction permits, 

that there no longer is a permitting deficiency requiring correction.  In essence, after the passing of the statute of limitations, the rather clear implication is that a modified source is viewed for all purposes, including future air permitting purposes, as if it had received a PSD permit for the previously “unpermitted” modification.  Although not explicitly addressed, this presumably means, as well, that the modified source is considered to have complied with any PSD increments that may have been applicable at the time of the previously unpermitted modification.


To view a complete PDF of the Second Quarter 2013 issue of the Air Quality Letter, click HERE.

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